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Central Asia and The Caucasus – Full of Corruption - 2001-07-28

The nations that emerged from the Soviet Union in Central Asia and the Caucasus were supposed to make progress with freedom. That has not happened, and many say the main reason is the pervasive corruption throughout the region. Experts say standards for doing business do not exist, or if they do, they are ignored by well-connected people out to make a fast buck (make a lot of money quickly) at the expense of their fellow citizens.

Last year, 141 government officials in Kazakhstan were convicted of various kinds of corruption. Think of the ones who got away (were not arrested), say observers who note with increasing dismay the level of corruption throughout the countries of Central Asia and the Caucasus. They say the countries would all be doing much better if criminals with government connections were not siphoning off their wealth.

Blame it, in the first instance, on Communism, says Laurent Ruseckas, a director of Cambridge Energy Research Associates: "It's a legacy of the Soviet inheritance where corruption and informal economic activity was fundamental to the system," Mr. Ruseckas says . "In fact, the Soviet command economy was so rigid it could not have worked without a lot of stuff going on outside the boundaries of what was acceptable in Soviet practice. And that has been handed down to this new free-wheeling free market system."

Those who were in powerful positions in Soviet times, remain on top today, says Robert Ebel, director of energy and national security at the Center for Strategic and International Studies in Washington. And he says they behave much as they did under Communism: "Leaders speak out quite frequently on the evils of corruption. But all they have to do is look in the mirror to see where it all begins," Mr. Ebel says. "It does begin at the top, and if it is going to be cleared up, it has to begin at the top as well, and that is unlikely to happen."

Should Westerners point out their misbehavior? Forget it, says Mr. Ruseckas. They just bring up the case of Marc Rich, the American oil dealer who is considered one of the chief looters of post-Soviet Russia. He was given a last-minute pardon by President Clinton. We don't need advice from hypocrites, they scoff.

The economic argument is another matter, says Robert Ebel. Corruption is a great drag on all their economies: "Has corruption really impeded the development of the oil sector? In my judgment, no," he says. "But the larger question would be: has corruption impeded the general economic development of the country? And to that question, I would have to say yes."

Mr. Ebel says oil companies have learned how to deal with corruption in other parts of the world and apply these lessons to the lands of the former Soviet Union.

Mr. Ruseckas agrees foreign investors acting with some degree of probity can set a standard for business practices: "Foreign investors have an important role to play by making clear that they will not get involved in corrupt dealings," he says. "I think especially the largest companies, which have this as part of their corporate culture, are doing a good job at that. In the very largest investment projects in the Caspian, with which I am familiar, it has not been a huge problem."

Robert Ebel says it's a simple message that foreign companies can deliver and heed themselves: follow the rules.